Current issues in economics

Moody’s downgrade ANZ National, ASB, BNZ and Westpac

Last Friday credit ratings agency Moody’s downgraded New Zealand’s four biggest banks, ANZ National, ASB, BNZ and Westpac. The downgrade from Aa3 to Aa2 status and the rationale for this was New Zealand’s subdued economy and the banks’ exposure to wholesale financial markets for funding.

“New Zealand major banks are structurally sensitive to wholesale funding market conditions. The major banks have around 40% of their total funding base sourced from wholesale funding, with around two-thirds of this being sourced offshore. Over the past 6-months, the major banks have enjoyed relief in funding pressure due to slower loan growth and higher customer deposit growth. The increased savings rate was supported by lower credit and consumption growth combined with moderate income growth. “ However, Moody’s said it believed this was not sustainable in the long-term.